1 Mar 2013

Further fall in terms of trade

8:23 pm on 1 March 2013

New Zealand's purchasing power against the rest of the world has fallen for the sixth consecutive quarter due to export commodity prices falling more than import prices.

Official figures show the country's terms of trade fell by 1.3% in the last three months of 2012, compared with the September quarter - the biggest fourth-quarter fall in three years.

It means fewer imports can be bought for every dollar of exports sold.

New Zealand's terms of trade have fallen 11% since they hit a 37-year high in the 2011 June quarter on strong demand and prices for dairy products.

Since then, prices for the country's major agricultural exports have fallen in line with weaker global commodity prices.

In the latest quarter, export prices fell 1.9% led by weaker prices for dairy and fish while volumes dropped 0.5% as meat, fruit and dairy exports fell.

Import prices fell 0.6% on lower mechanical machinery prices. While import volumes were lower, the trend remained at a high level.

ANZ Bank senior economist Mark Smith said the high New Zealand dollar pushed down prices and the terms of trade were weaker than expected.